Several things are underway directly affecting Defence: the May budget; the findings of the Commission of Audit; the Winter-White AWD review.
9th May 2014
Several things are underway directly affecting Defence: the May budget; the findings of the Commission of Audit; the Winter-White AWD review. Further in the background is the 2015 White Paper and – related to it – signs of progress on SEA 1000. The possible result of all of these activities will be a revitalized and refocused Department, doing more with existing resources.
Despite the Coalition having an aspirational target of lifting Defence spending to 2% of GDP, this appears to be some way off – barring some sort of dramatic unforeseen deterioration in Australia’s security circumstances. The Commission of Audit recommends walking away from a specific percentage, saying that expenditure should be based on an assessment of what is required, which is a valid point. If a Government is locked into a GDP-based formula, then the money that is available to Defence will fluctuate depending on how quickly – or not – the economy is growing.
The most extreme case of this sort of approach – at least in the developed world – appears to be Chile, where military spending is based on the price of copper. For many years Japan’s defence expenditure was limited by the post-World War II constitution to 1% of GDP and nevertheless developed a formidable force. At the other end of the scale, for several decades Myanmar spent a very high percentage of its GDP on security and derived from that a large modestly equipped army and not much else – apart from a large number of extremely wealthy senior officers.
All of the number crunching by suitably qualified economists, such as at the Australian Strategic Policy Institute, seem to be heading in the same direction – another billion or two per year on procurement and sustainment should allow us to achieve basic White Paper goals. Having said that, that amount does not necessarily need to be additional money – some could come from internal savings. In almost every edition of APDR we detail activities that seem to be costing Defence and industry way too much. This time we look at the Air Warfare Destroyer; the inability of Army to conduct a simple purchase of grenade launchers; and the mysterious case of the suspension of the attempt to find a partner for the Domestic Munitions Manufacturing Agreement.
We have often expressed the view that Australia receives remarkable little for our sizeable procurement budget. For the same amount of money South Korea has an enormously capable military. With a defence budget one third the size of ours Singapore has a more modern and capable air force and army, with their navy also making rapid strides. Surely the time has come for someone senior in Defence to spend time in those countries learning how it is that they are seemingly so much more efficient than we are.
The Australian system seems to be complacent and directionless – probably because the country has never faced an existential threat (except for the qualified case of the early part of 1942), so our conflicts are one of choice and tend to be a great distance away. This seems to be a partial explanation for the lack of energy that successive administrations put into defence procurement – and that can only be addressed if there is a more general willingness to change things for the better. Countries that face more immediate threats also seem to be far more aware of the importance of their industry support base than we are. It is much easier to speed up an existing production line for ships and submarines – even a lightly loaded one – than it is to create something from nothing.
Bureaucracies are like a gas: they expand to fill the maximum volume available to them and tend to lose energy in the process. What is needed are energetic Ministers who are prepared to drive change – a whole of Cabinet approach, which the Commission of Audit is appealing to. The central player is the Defence Minister, but the Prime Minister, Treasurer, Industry Minister, Foreign Minister, Finance Minister and others all need to be in general agreement that reform is highly desirable.
Because the Defence Department and successive Ministers have encouraged a climate of obsessive secrecy about anything connected with the portfolio, it should surprise no one that opinion polls show that a significant majority of Australians don’t support the April 23 decision to purchase a total of 72 F-35s. Indeed - possibly because of the same obsessive secrecy - neither the Defence Minister nor the Prime Minister were able to explain clearly where the money was coming from when they made the announcement, speaking strangely about successive Governments having put money aside. No such thing has happened and the explanation is simple: this will be paid for out of the normal annual Defence budget allocation over a period of many years. There is no F-35 levy needed.
There is now finally an opportunity to make major structural changes to the way Defence operates, rather than tinker at the margins with yet another review – the findings of which will be ignored. Return the functions of DMO to the Department; reduce the head count at senior levels; return to a committee system that can be understood by all; sell ASC; re-baseline the AWD and use it as a stepping stone to a rolling build program.
Finally, Prime Minister Abbott has promised an open and transparent Government. Defence will be a very good place to start.